The effect of education on homeownership: Evidence from 20th century school attendance laws in the United States

Abstract

This article examines the causal impact of schooling on the probability of homeownership using decennial US Census data between 1960 and 2000. This is done by employing an instrumental variable approach that exploits historical changes in state mandatory schooling and child labour laws which affected the educational attainment of individuals with relatively low levels of schooling. Aggregate results suggest that policy-induced increases in schooling at the bottom of the educational distribution have a positive impact on homeownership rates of 1.9 percentage points. Disaggregated results reveal that the impact of education is highest among individuals who are located in the middle and top terciles of the income distribution with no effect of additional education in the lowest tercile. These results add to the growing body of literature which suggests that education may lead to positive outcomes beyond labour market earnings.